Dave Appleton: The HelloGold Lending product

It has been some time since I posted about HelloGold the product as opposed to all the cryptocurrency aspects. It would be easy to think that the cryptocurrency side of things is more important to us. Nothing could be further from the truth. HelloGold is in the midst of setting up operations in Bangkok. Our mainstream product development is ongoing and our customer base is increasing month on month.

We are also finalising the lending product with AEON Credit. AEON are a massive Japanese retail chain with about 100 million customers across Asia. As part of their operations, they established a credit department which later spun off as a separate credit service.

So why take a loan if you have savings in gold?

This may seem strange and counter intuitive when we are encouraging people to save with gold but I end up explaining it quite often.

As mentioned in a previous post, we encourage saving in Gold to counter the kind of currency volatility that ravaged the Asian region in the financial crisis of ’97. People in Malaysia saw the value of their savings drop to half of their former value; Indonesia and Thailand had it much harder.

Some time back we received a report from the Malaysian Central Bank that found that in an emergency, 75% of all Malaysians were unable to raise the equivalent of USD 250 or RM 1,000.

Unable to get bank loans, people turn to loan sharks or pawnbrokers.

If you are not familiar, loan sharks are illegal money lenders, often linked to gangs, who charge seriously exorbitant interest rates and resort to intimidation when people can’t pay up.

Pawnbrokers, despite the facade of regulation, are often little better. Having been asked to work on a system for a group of pawnbrokers back in 2003, I found out about the unethical methods that they often use to avoid such responsibilities like paying back the balance of the value of forfeited goods if the customer fails to redeem the item.

What we have designed is a system which is fair. The loan, being backed by gold collateral, is granted at very competitive rates. In the unfortunate event that a person fails to complete repayment of a loan, only the amount of gold required to pay off the remainder of the loan gets liquidated. The rest gets refunded.

So why would people take a loan against their gold rather than simply sell the gold? There are a number of reasons.

Discipline : When you cash in your gold to pay for a crisis, it can be hard to get started again. By taking a loan you agree to the structure of a fixed repayment schedule at the end of which you are left with your gold.

Gold is more than a saving : If you believe, as many do, that gold is likely to appreciate in value over time, taking a loan gives you something that could well be worth more when you have redeemed it than when you pledged it.

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